Capcom switching their games from "one time purchase" to continuous recurring model

So they want to release half baked products and continue so spit out new content bit by bit and force you to buy them, good luck with that.

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Capcom switching their games from "one time purchase" model to "continuous recurring revenue" model

Capcom's President and Chief Operating Officer Haruhiro Tsujimoto outlines the company's strategy in a growing consumer market including consoles and cloud.

Today Capcom released its annual report intended for analysts and shareholders, including a lot of interesting information on the company’s strategies.

One of the most interesting parts of the report is a chapter written by President and Chief Operating Officer Haruhiro Tsujimoto, on the plans for the “consumer” market, which is how Japanese companies call the console market. Upcoming console-level cloud gaming initiatives are also being bundled into this market.

Capcom considers the consumer market as a driver of growth and expects it to grow to 36.6 billion dollars by 2022, which is a 45.9% growth compared to 2017. Past growth is explained by the increase of the installed base of current generation consoles and the release of the Nintendo Switch. While packaged game sales are remaining flat, digital sales are skyrocketing. North America and Europe take approximately 85% of the market, and digital downloads have reached 54%.

The forecast for 2018 is a growth of 13.1% year-on-year. In the medium term, Capcom expects the further spread of video game consoles and new digital distribution methods like cloud gaming, leading to the aforementioned 45.9% growth by 2022.

Tsujimoto-san mentions that the expansion of the lineup of new titles and sale promotions of catalog titles helped the company achieve profit margins in the 30% range by March 2018. While maintaining this basic strategy, they intend to better respond to the need of existing customers and increase their satisfaction while pursuing new ones.

The first part of Capcom’s strategy involves aiming for steady annual releases on the global market of its core IPs like Resident Evil, Street Fighter, and Monster Hunter. They intend to analyze the factor behind the Monster Hunter World success, and proactively recruit new graduates to bring the developer workforce to 2,500 by 2021. This will be done in order to increase the number of major new worldwide releases.

Capcom intends to maximize revenue from current core IPs, while also utilizing dormant IPs. The company recognizes that “the creation of new IP is also indispensable for medium- to long-term growth” so they aim to continually create new brands as well.

Of course, boosting digital sales is also seen as critical, and Capcom is close to achieving its medium-term objective of 50% digital download sales ratio. There is still a lot of expansion in this field, including the utilization of dormant IP.

Another interesting element is the intention to focus on improving customer satisfaction by providing free additional content via digital download, which positively impacts the growth of the next title of a franchise. On the other hand, paid DLCs focus on items that don’t impact game progressions like costumes and weapons.

Capcom recently created the Global Marketing Group and improved its practices resulting in Monster Hunter: World becoming “the first title on which management, development and business came together to make full use of the internet to expand sales and realize improved quality.”

The analysis of the preference of global users resulted in the release of a demo of Monster Hunter World, which contributed to the title achieving its hit status. Extracting and analyzing data from the standpoint of user satisfaction is seen as an “extremely important” factor in marketing video games, which are seen as luxury items.

Last, but not least, Tsujimoto-san explains that it’s essential to develop detailed IP brand strategies in the current expanding market. This includes analyzing user attributes like platform ownership status and price sensitivity for each IP. Capcom established a specialized department in April, uses new analysis tools.

Interestingly, while talking about mobile releases Tsujimoto-san also admitted that the gacha business seems to have reached its peak, and mobile games are over-reliant on it.

Growth Strategy Aimed at Increasing the User Base of Each IP Medium-term Long-term As the founder of Capcom, I think it is important to create a structure for passing the business on to the next-generation. As with any structure, building the foundation is the most challenging part, but efforts launched five years ago are finally starting to take shape. To establish solid growth strategies and further enhance corporate value, there are two risks that are critical to address; first, I will talk about the stable growth mechanism (control of earnings volatility risks).

To mitigate earnings volatility risks over the medium-to-long term, measures enabling sustainable growth must include (1) transforming the foundation of our Consumer business model from a traditional one-time sale “transactional model” to a continuous “recurring revenue model” and (2) creating a business portfolio and diversifying earnings risks by thoroughly leveraging Capcom’s basic strategy, Single Content Multiple Usage.